What are Gold Exchange Traded Funds (Gold ETFs) ?

About Gold Exchange Traded Funds ( Gold ETFs):

• They are commodity-based exchange-traded funds with an underlying asset as gold.
• They are passive investment instruments that are based on gold prices and invest in gold bullion.
• Gold ETFs are units representing physical gold which may be in paper or dematerialised form.
• One Gold ETF unit is equal to 1 gram of gold and is backed by physical gold of very high purity.
• Gold ETFs combine the flexibility of stock investment and the simplicity of gold investments.
• They are listed and traded on the National Stock Exchange of India (NSE) and Bombay Stock Exchange Ltd. (BSE) like a stock of any company.
• It can be bought and sold continuously at market prices.
• There is a complete transparency on the holdings of a Gold ETF due to its direct gold pricing.
•  ETFs have much lower expenses as compared to physical gold investments.

What is an Exchange Traded Fund (ETF) ?

• An ETF is a collection of investments such as equities or bonds.
•  It is a basket of securities that trades on an exchange just like a stock does.
• ETF share prices fluctuate all day as the ETF is bought and sold, which is different from mutual funds, which only trade once a day after the market closes.
• ETFs can contain all types of investments, including stocks, commodities, or bonds
• They have cheaper fees than other types of funds.

What is Passive Investment?

• It is an investment strategy wherein investors buy securities that mirror stock market indexes and hold them long-term.
• It is a strategy that focuses on replicating the index performance as opposed to daily buying and selling.
• Passive investing seeks to avoid the management fees and high transaction costs that frequent trading can cause.

 

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Q1) What is an active investment?

Active investment is a form of investment strategy that involves actively buying and selling assets in the hope of making profits and outperforming a benchmark or index.

Source: Gold ETF inflows slump as prices rise